The Czech koruna (CZK) is a fully convertible currency, which makes sending money to the Czech Republic and transferring money from the Czech Republic relatively simple.
Foreign capital related to investment, including profits, dividends, interest and royalties, can be remitted freely without limit after applicable taxes, and repatriation payments can be made in any currency. Carrying hard currency in or out of the country is unrestricted under the amount of €10,000; any amount above this threshold must be declared to customs authorities.
The Czech National Bank (CNB) is the primary authority charged with monitoring the health of the financial system and the foreign exchange market, ensuring the stability of the banking sector, preserving the country’s foreign reserves and maintaining price stability.
The koruna is on a managed float benchmarked against the euro, and the central bank works to stabilise its value by setting inflation targets and intervening in the monetary market when the exchange rate veers outside of the standard spectrum. The inflation target has been set at 2% since 2010. In November 2013, the CNB began intervening more directly in the foreign exchange market by issuing excess liquidity onto the market, which lowered the koruna to the bottom limit of the exchange rate, around CZK27 to the euro; this policy is expected to last until 2015, or until inflation picks up.
When the former Czechoslovakia broke up into the Czech Republic and Slovakia in 1993, the new countries disintegrated the federal currency and introduced two separate national currencies. The monetary swap required heavy capital controls for some time, but the Czech economy performed comparatively well in the early years of nationhood. Since then, the government has largely dismantled capital controls and established an open environment for foreign investment. Today, the Czech economy relies heavily on the foreign exchange market; exports accounted for 81% of its GDP in 2013.
The Czech Republic has been sheltered from some of the effects of the debt crisis in the eurozone, thanks largely to its having retained its own national currency, the koruna, and its ability to set independent monetary policy. Nonetheless, the Czech Republic’s export-focused economy is reliant on demand from its key consumer markets, particularly Germany, and lower European demand has caused GDP growth to slump at several points in the last five years.
The Czech Republic joined the European Union in 2004 and the Schengen free-circulation area in 2007. The government plans to adopt the euro once the necessary fiscal and monetary conditions are in place. The country’s initial target date was in 2010, but several Eastern European countries, including the Czech Republic, Hungary, Poland and Romania, all put their eurozone accession plans on hold during the global economic downturn. The Czech Republic does not have a target date to adopt the euro, but the central bank governor has indicated that the earliest possible date would be in 2019.
The Czech monetary unit, the koruna (CZK), is abbreviated as Kč. The central bank issues banknotes is values of Kč100, Kč200, Kč500, Kč1000 and Kč2000. Coins are issued in denominations of Kč1, Kč2, Kč5, Kč10, Kč20 and Kč50.
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